Borrowers who fell behind on their mortgages during the Covid-19 pandemic and continue to face economic hardship will receive help from a Biden administration program announced on Friday, an attempt to prevent a sharp increase foreclosures over the next few months.
The program would allow borrowers on loans guaranteed by the Federal Housing Administration and other federal agencies to extend the term of their mortgages by freezing monthly payments of principal and interest. About 75% of new home loans are guaranteed by the federal government, according to the Urban Institute.
Friday’s changes are for homeowners who have taken advantage of so-called forbearance programs that have allowed them to skip monthly payments for up to 18 months, but who cannot resume those normal payments as this relief begins to expire. .
Adding new modification options for struggling homeowners is “an important additional step in giving people the option to stay in their homes after struggling during the pandemic,” said Bob Broeksmit, president and CEO of the Mortgage Bankers Association.
About 1.55 million homeowners are severely delinquent, which means they haven’t made mortgage payments for at least 90 days, according to mortgage data company Black Knight Inc. These borrowers, most of whom have plans forbearance, foreclosure in the coming months. They represent around 2.9% of the 53 million active mortgages, up from a peak of around 4.4% in August and September 2020.